Managing Director (Jamaica Bauxite Mining LTD)

Is Jamaican bauxite still competitive?

It’s still competitive on this side of the world and the Atlantic because the mining costs are relatively cheap. This is because the bauxite is mined on the surface whereas in Australia and some other places you have to go very deep to get it. The topsoil, before you get to bauxite, is probably 1/3 of a meter so it’s very shallow. Most of the pits are very small and the layers don’t go too deep. The average dept is around 15 metres.

We go beyond bauxite though. We have four alumina refineries that produce alumina and we only have one company that ships bauxite out. It takes 2.5 tons of bauxite to make a ton of alumina. In all between bauxite that we ship and bauxite that we processed to alumina, we have produced around 600 million tons to date.

But the high cost of energy in Jamaica would raise the price of production?

That’s why two of the plants have closed. The largest one, Alpart, closed and Kirkvine as well because of the high cost of energy. Even the Ewarton plant that is open, is running at a high energy cost. JBM  owned 7.0% of that plant but we  sold it to Rusal last year because the costs of production were way beyond the world price of alumina so we just couldn’t keep it. Since they owned 93%, we thought it best to offer it to them and they accepted.

So what has to be done?

We have to change the source of energy to be competitive. The move from oil to either coal or gas would bring down the price of producing alumina significantly.  To make it even cheaper they’re proposing selling excess power produced at the alumina plant to supply the national electricity grid.  For example, there will be a new plant that uses gas and will supply 140MW to the national grid and so this will also solve the national grid problem because over 90% of of Jamaica’s power comes from use of oil. Consumers pay about US42 cents for a kilowatt whereas in Britain you would pay about 8-10 cents or 9 cents in the United States of America (USA). So our industries on a whole cannot compete, resulting in a significant amount  of the  industries that we  had in the past  migrating to Trinidad and places like that where  energy is cheap.

Who are the main buyers of Jamaican bauxite?

The main buyers of alumina are in the US, Canada, Europe  but there are contracts all over the world. They have also shipped from here to China and Russia. The raw bauxite goes to two particular plants in the USA.

Who are your biggest competitors?

There are some countries in this region such as Surinam and the Dominican Republic that have relatively small amounts of bauxite. Brazil is still active and Guyana has some also. Guinea has the largest reserve of bauxite in the world but it is underdeveloped. Rusal has an inactive alumina refinery there. That country has about 29 billion tons of  bauxite and probably more.

The Jamaica Bauxite Institute (JBI) is a recognized repository of information on bauxite and alumina, and enjoys a solid reputation for research and analysis of data and trends in the industry.
How is the JBI enhancing opportunities for the sector?

It helps with industrial relations from the point of view of community relations. In Jamaica, bauxite exists close to homes so one can adversely disturb communities. As such, JBI assists the companies in forming community councils to create harmony, put things in place to minimize the disturbances and support agriculture, sports and schools. The JBI was delegated environment responsibility by the National Environment Planning Agency. The Companies do things like construction of greenhouses for farmers . They also go into the schools in dry areas and give them green houses so children learn how to operate green houses.  The schools produce tomato, lettuce and other crops that they  sell to the community. It teaches them through farming.

The Noranda Jamaica Bauxite Partners is a partnership  of Noranda Bauxite limited an American company that owns 49% of the partnership with Jamaica Bauxite Mining Limited owning the rest. They do a phenomenal amount of things for the communities in which they operate, for example, because the area where they mine is a dry area they are building ponds utilizing the  mined out pits. these are sealed  used as catchments and then they provide water for farmers.

The JBI has been experimenting with rare earth materials. Tell us about this.

The JBI and Nippon Lite Metals have been experimenting with the extraction of rare earth minerals from the red mud. They have built a pilot plan to extract these elements from the mud  The rare earth minerals are used in things like televisions.

Minister of Science, Technology, Energy and Mining, Hon. Phillip Paulwell, has emphasized that the bauxite and alumina sector must abide by all environmental rules and regulations. What steps has Jamaica Bauxite Mining (JBM) taken to comply with environmental regulations?

From day one we had very responsible companies but the laws are pretty stringent too and they are heavily monitored. The bauxite companies have to  reclaim every hectare of land they mined. . They remove   the topsoil, store it  and replace it when the bauxite is mined and the area reclaimed. The reshaped land is then grassed after the topsoil is spread or the area might be used for agriculture and at times for housing , play fields or other activities approved by the Commissioner of Mines.  The JBM complies with or gets its partners to comply with all environmental stipulations

Are JBM and the Bauxite and Alumina Trading Company of Jamaica Limited (BATCO) still involved in the marketing of the government’s share of bauxite resources and sale of alumina?

JBM, yes but we have just closed BATCO. BATCO  used to sell alumina on behalf of the government companies . I don’t have any alumina to sell anymore as JBM also divested its interest in Windalco. Up to two years ago, I sold alumina for another government company, which owns 45% of the Jamalco plant. They decided to sell the alumina  on their own.

Some properties used to be owned by R.J. Reynolds, who was an early producer of bauxite in Jamaica, if not the first.  They packed up some years ago and the government took over through JBM. They stopped producing bauxite sometime in 1986. The offices and workshops are there and we are now working to convert the area into an industrial complex.. There have been people showing interest in using these buildings, one such is a company that repairs transformers for the local power company and there is  a plant to produce flavoured honey. In that way, using these old plants is creating new industry.

How is JBM funded?

It’s funded internally; there is not a penny from the government. We facilitate the shipment of sugar, limestone and dock cruise ships at our port. We ship most of the limestone, which is extracted by local company Lydford Mining Company,. It’s pharmaceutical grade limestone is very pure. The sports car, the Corvette,  actually has some of these materials in it because it has a plastic body. The materials that go into the car have special qualities. JBM collects  fees for handling these materials through the port.

Can Jamaica’s bauxite and alumina industry benefit from FDI? What investment opportunities exist in this sector for foreign investors?

Yes, there are millions and millions of tons here still, which we still hope to tap into. The Chinese looked at it but the problem we had is that the bauxite/alumina will not be easily shipped.. The port was built when we  had a little village in Ocho Rios where the port is situated but it has grown to a town now with cruise ships most days, so we can’t use it to ship bauxite as the environmental problems associated with bauxite could affect cruise shipping..  Our problem is where to ship the bauxite from. In the Dominican Republic they anchor these big 180,000 tonnes ships three kilometres out at sea  and load them by use of barges.. We were thinking of doing the same thing here but the mega liners cannot dock on the north coast where we have the bauxite.   Because of the depth of the sea close to shore, they cannot anchor so these are the challenges for Jamaica to export to China using large ships.. They have identified somewhere off the south coast which would be just about 15 meters deep where the large ship can anchor.

 If we are going to ship it to China, it is all about cost but you can manage that with large ships. For example, with 60,000 ton ships when compared to 180,000 ton ships, your cost per ton is nearly three times more. It’s not exactly the same thing for alumina because of it’s higher value. Bauxite is $30-36 per tonne market value but for alumina its $338. . In 2009 when the prices fell out for aluminum, we had to close alumina plants to cut the supply. in. If we didn’t do that, the price wasn’t going to go up. It’s basic economics in that sense.

Also 70% of Jamaica is limestone, all varieties from the very pure to limestone that is less pure and used for aggregates.. , The same company, Lydford Mining Company ships crushed stone that they use to clean  exhaust gases from coal fired power plants in North America and Chile. Limestone doesn’t put as much dust in the air as bauxite. It’s a much cleaner material and so does not create the same dust problem at the port.

How is JBM communicating these opportunities to the international investment communities?

We do promotions through the ministry. Even yesterday, we had a Chinese delegation with the Minister. We had another delegation before and they spent a month or two doing their evaluation. It is mainly the Chinese because of the financing. We are in partnership also with China MinMetal and they have spent quite a bit of time here doing drilling and exploration in the former closed bauxite area.
The study evaluated that area alone and we found that we have about USD12 billion worth of alumina potential if the bauxite is converted to alumina.. It’s about feasibility and as it is now, oil accounts for 60-70% of the cost of production. It’s approximately USD350 to produce a ton of alumina so if we can get the fuel cost down, it would reduce the cost of production drastically.  .

Why hasn’t this been done until now?

Well if they were able to import the gas, it would make a fundamental difference.  One of the problem we have had is changes in government or ministers that have different ideas as to the energy solution. I suppose countries like China would not have that problem as they don’t have frequent changes in government and policies as we do.

The readers of Harvard Business Review include many of the world’s most influential business and political leaders. What message would you like to send them about Jamaica’s bauxite industry?

The bauxite industry in Jamaica has great potential for growth. We have  mined  much but we still have as much reserves as we have mined since 1952. It’s a mineral that will always be in demand because of its purposes and versatility for use in motorcars, transport, housing etc. So there is demand and I think that they have projected 6% growth in demand each year. The government is facilitating  the right energy infrastructure. The cost of production should come down and it will be a profitable industry before 2020.  So I would recommend that foreign investors and even Jamaicans  look at investing in the industry and putting their money there as they can make great returns.